PRI paper explores link between ESG factors and corporate credit risk

The Principles for Responsible Investment (PRI) Initiative published a new discussion paper on 12 December 2013 examining the link between environmental, social and governance (ESG) factors and corporate credit risk to help signatories better understand how ESG analysis can be used as a potential risk-reducing, return-enhancing tool for corporate fixed income investment.

The analysis and experience of the PRI’s Corporate Fixed Income Working Group, made up of nearly 50 representatives from some of the world’s largest pension funds and investment managers, is reflected in the paper. It draws on academic and industry research to highlight how different ESG factors correlate with bond yields, credit ratings and, ultimately, investment performance.